ATHENS - World stock markets kicked off the fourth quarter on a dismal note as Greece's admission that it will miss its deficit target raised new doubts over a planned second bailout.
The news from Athens brought the spectre of a debt default even closer and weighed on talks among euro zone finance ministers in Luxembourg yesterday on the next steps to try to resolve the currency area's sovereign debt crisis.
About half an hour after the opening bell in New York, the Dow Jones Industrial Average was down 0.5 per cent, extending Friday's 2.2 per cent loss. Late in Europe, London's FTSE was down 2 per cent, Germany's DAX was 2.8 per cent lower as Greece's ATHEX fell 2.9 per cent. Earlier, in Asia, Hong Kong's Hang Seng slumped 4.4 per cent on heavy fund selling and Japan's Nikkei lost 1.8 per cent. China was closed for holidays.
The euro fell 0.5 per cent to US$1.3314 (S$1.74683), its lowest level since Jan 18 while gold jumped 2.1 per cent to US$1,657 an ounce. The draft budget sent to the Greek parliament yesterday showed this year's deficit would be 8.5 per cent of gross domestic product, much worse than the 7.6 per cent agreed in the bailout programme between Athens, the European Union (EU) and the International Monetary Fund (IMF).
Finance Minister Evangelos Venizelos said that the 2012 fiscal targets would be met in absolute terms and Greece would have a primary surplus before debt service for the first time in many years. However, next year's deficit is projected to be 6.8 per cent of GDP, rather than the 6.5 per cent EU/IMF goal, because the economy is set to shrink by a further 2.5 per cent after a record 5.5 per cent contraction in 2011.
Deeper-than-forecast recession means public debt will be equivalent to 161.8 per cent of GDP this year, rising to 172.7 per cent next year, the highest in Europe.
Deputy Finance Minister Pantelis Oikonomou said the EU and IMF inspectors had "essentially concluded" negotiations to give Greece a crucial 8 billion euro instalment of aid to avert bankruptcy. The 17 euro zone ministers are set to decide on the funds at a special meeting on Oct 13, just days before Greece would run out of cash.
AGENCIES
Via: http://www.todayonline.com/Business/EDC111004-0000163/Greek-debt-tragedy-hits-markets-again
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